Tuesday, July 20, 2010

The most valuable asset in most franchise systems is the brand. Amazingly, it is in many instances not properly protected. To obtain competent protection for a brand, it is necessary to register all the trade marks, parts or aspects thereof which form part of the brand, at the South African Trade Marks Registry or at the relevant country or regional registry.
In terms of our Trade Marks Act the definition of a trade mark is extremely broad and will include any sign capable of distinguishing the relevant goods or services from those of others. This will include a word, name, slogan, logo, label, packaging, colour or colours, the shape and configuration of a product, any design or ornamentation thereof and any combination of all the aforegoing.
To be registrable a trade mark must be distinctive in that it must be capable of distinguishing the products or services in relation to which it is used from the products and/or services of competitors. The more descriptive or common a particular term or trade mark, the more it is likely to be used by others and the more difficult it will be to protect. It is therefore often not prudent to adopt a name or trade mark which is descriptive, common or reasonably required in the trade. Only the distinctive elements are ultimately protectable. 
The usual approach to considering what aspects or elements of the brand and what trade marks need to be protected will very broadly include the following:

Protection of the name or word trade mark in ordinary block letters, which provides relatively broad protection for the core mark
Consideration should also be given to protection for any logo. The usual first step here is to register the logo in black and white, which means, that it will be registered without limitation as to colour, as a result of which it is deemed to be registered for all colours. 
If the colour or colour combinations are however also important, then consideration should be given to filing applications to register the specific colour logo or colour combinations. 
Consideration should also be given to the protection of labels and packaging, with and without the name and core trade mark, so as to ensure that these are also protected. 
Unique, distinctive and identifying features, shapes, designs and ornamentation of the products should also then be considered, as well as that of any container. 
Any unique, distinctive or identifying aspect including any combination of the aforegoing.

All goods and services are classified into forty five classes and protection should be sought in each and every relevant class of goods or services. In most instances, protection will only be enjoyed for the specific goods and/or services in relation to which the trade mark is registered, or goods and services which are similar to those in respect of which registration is enjoyed. For example, if a pizza franchise restaurant only enjoyed registered trade mark protection in class 30 for the word or name trade mark for pizza products, it would not enjoy registered trade mark protection in relation to for example franchising services in class 35 and restaurant, fast food, take away and similar services in class 43. It will then be able to prevent third parties from using the identical or similar word trade mark in relation to pizza products, but may have great difficulty in attempting to prevent third parties from using the same or a similar trade mark in relation to, for example, franchising services (class 35) and restaurant, fast food, take away and catering services (class 43). Further, if only the name or word trade mark is registered, then protection will only be enjoyed for this and not for any logo, slogan, label, and packaging or other distinctive elements of the brand or product.
Consideration should also be given to protecting all trade marks forming part of the brand, wherever the trade mark or brand is used or intended for use and also in certain instances, for strategic defensive purposes.
The benefits of registration as opposed to the risks of not acquiring registered trade mark protection briefly include the following:

Future use of the brand and trade mark is protected as opposed to little or no protection
A broad monopoly in the brand or trade mark is obtained as opposed to no or a restricted monopoly.
A registration will blanket the entire country as opposed to common law rights in the specific limited geographical area of operation.
Registered trade marks will provide protection for and keep future markets open for expansion whereas no or limited protection will be enjoyed
The costs to obtain registration are relatively inexpensive as opposed to attempting to enforce one’s rights without a registration. 
It is usually less costly to enforce rights if registered trade mark rights are enjoyed as opposed to relatively more costly if there is insufficient or no registered rights
Substantially enhances the value of the brand, as opposed to the brand continually being at risk.

A trade mark or brand should be managed at board level in conjunction with strategic business, product or services decisions. A critical or standard operating procedure should be in place to competently manage the trade marks and brand on an ongoing basis.
Corporate governance dictates that a sound system of risk management and internal control is maintained to safeguard and competently manage the company’s assets, including those which are the most valuable, so as to inter alia safe guard the company assets from business continuity and market risks, which could certainly arise if the brand is not properly protected. This is of course the case in each and every business, but is even more relevant in a franchise system, where the brand and trade marks are licensed to the franchisees who in turn pay royalties to the franchisor for the ongoing use of the brand and trade marks.
Brands have become immensely powerful marketing tools and from the consumer’s point of view brands serve primarily as a sign of identification and also as a guarantee of consistent quality. As a result the value of a brand can be immense. Thus, any failure to on an ongoing basis obtain competent registered trade mark protection for all trade marks forming part of your brand, in all classes and countries of interest and to competently manage this valuable asset, substantially places the franchise system at risk and is short sighted. Competent registered trade mark protection and ongoing management of the trademark portfolio are therefore recommended so as to ensure that this cornerstone of the franchise system is properly protected.